Facing a crushing volume of emergency loan requests, FirstBank has temporarily stopped taking applications under the Paycheck Protection Program through the U.S. Small Business Administration.
The PPP loans are designed to serve as a lifeline for small businesses with fewer than 500 employees until the economy reopens. A survey from the National Federation of Independent Business found that 70% of small businesses had applied or attempted to apply for some type of emergency aid. Of those that didn’t, half planned to do so.
PPP loans officially launched April 3, and FirstBank waited for additional guidance from the Treasury Department and the SBA before accepting applications on Monday. Within 72 hours, it had received more than 15,000 applications for around $2 billion in funding.
To handle the demand, FirstBank said it pulled in hundreds of employees to work split shifts around the clock. Despite that, the bank hasn’t been able to keep up and took a pause to catch up.
“We are having to temporarily pause on any new SBA PPP applications to focus on closing and funding the current, approved loans,” the bank said in a statement. The plan is to reopen the application portal by midday on April 14, said Chandra Brin, the bank’s public relations manager.
FirstBank, with about 100 branches in Colorado, ranks second in deposits in the state after Wells Fargo. Over the past 30 years, it has issued $600 million in SBA loans. Just this week, it has received more than three times that volume.
Wells Fargo had to shut down PPP lending after quickly reaching growth limits mandated by regulatory orders that followed its fake account creation scandal. The Federal Reserve stepped in to grant Wells Fargo more leeway to make emergency loans.
Having the state’s two largest banks offline or constrained in new applications could complicate things for the self-employed, independent contractors and gig workers who were allowed to start applying for loans on Friday, April 10.
“Banks are working as hard as they can and as fast as they can, into the night and over the weekend, to process and disburse PPP funds to businesses. This is an unprecedented time for bankers and borrowers,” said Amanda Averch, a spokeswoman for the Colorado Bankers Association.
The Paycheck Protection Program received an allocation of $349 billion under the $2.2 trillion CARES Act, an unprecedented amount. But the program is first-come, first-served, and struggling small-business owners, fearful the money would run out, rushed to apply with their banks.
Congress is working on adding another $250 billion to the PPP, but that effort has bogged down. Some industry groups argue even more is needed. The U.S. Travel Association pleaded for a $600 billion allocation on Friday, as well as a lifting of the requirement that to be forgiven, 70% of the loans be used for payroll expenses.
With traveling spending down 85%, the association estimates that up to 15.8 million jobs in the industry are at risk. The question for many now isn’t about keeping workers on the payroll, but surviving long enough to be around to hire workers back once restrictions lift.
“The CARES Act was an ambitious step, but now the urgent problem is that assistance is simply not getting where it needs to go,” said U.S. Travel Association CEO Roger Dow in a statement. “Major adjustments and more aid are needed immediately to support small businesses, including local non-profits, that are essential engines of the travel economy.”
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